What Should You Do if You Need to File a Late FBAR?
The automatic extension for filing an FBAR expired on October 15, 2021. If you haven’t yet filed an FBAR for the 2020 tax year, your FBAR is now late. As the IRS noted in a recent reminder, “[t]hose who don't file an FBAR when required may be subject to significant civil and criminal penalties.” Here, Washington D.C. international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what you should do if you need to file a late FBAR.
What are Your Options if You Need to File a Late FBAR?
Taxpayers who are behind on their FBAR filing obligations have three primary options. The first option is to utilize the IRS’s streamlined filing compliance procedures. These procedures allow taxpayers who have committed non-willful violations to remedy their violations without facing an IRS audit or investigation.
The second option is to utilize IRS CI’s Voluntary Disclosure Practice. This is an option for taxpayers who have willfully failed to file their FBARs. As IRS CI explains, “submitting a voluntary disclosure may be a means to resolve your non-compliance and limit exposure to criminal prosecution.” Not all taxpayers who have committed willful violations qualify; and, even for those who qualify, submitting a voluntary disclosure is a delicate matter that requires a careful and knowledgeable approach.
The third option is to file a late FBAR with a statement of “reasonable cause.” The IRS does not penalize taxpayers who, “properly report a foreign account on a late-filed FBAR if the IRS determines there was reasonable cause for late filing.” The IRS judges “reasonable cause” on a case-by-case basis, and taxpayers must work with experienced tax counsel to determine if they are eligible to file a late FBAR without penalty.
What You Should NOT Do if You Need to File a Late FBAR?
There are other possible courses of action outside of these three options; however, generally speaking, they are not advisable for taxpayers to pursue. For example, it is generally inadvisable for taxpayers to:
- Ignore Delinquent FBARs – If you are behind on your FBAR filing obligations, the IRS will catch up to you eventually. If you ignore your delinquent filings, you will be at risk for substantial penalties in the event of an audit or investigation.
- Make a “Quiet Disclosure” – Attempting to correct past filing mistakes in subsequent filings is referred to as a “quiet disclosure,” and it is not permitted under the Bank Secrecy Act or the Internal Revenue Code.
- File a Late FBAR Without a Statement of “Reasonable Cause” – Simply filing a late FBAR can lead to unnecessary penalties. Rather than filing late, taxpayers should consider voluntary disclosure in most cases.
Speak with a Washington D.C. International Tax Attorney in Confidence
If you missed the October 15 deadline to file your 2020 FBAR, we strongly encourage you to contact us for more information. To request an appointment with Washington D.C. international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 202-349-4033, email firstname.lastname@example.org or contact us confidentially online today.